Tax incentives viewed as crucial to luring businesses


Prioria Robotics vice president of engineering and co-founder, Jason Grzywna, left, and CEO and co-founder Bryan da Frota, right, stand with Gov. Rick Scott, center, during his visit to Gainesville in this Oct. 19, 2012 file photo. Prioria Robotics has been approved for a $56,000 rebate to create an additional 40 jobs.

Erica Brough/The Gainesville Sun
Published: Wednesday, January 16, 2013 at 6:50 p.m.
Last Modified: Wednesday, January 16, 2013 at 6:50 p.m.

If Mobiquity expands into Gainesville, it would be the 14th company persuaded to move to or stay in Alachua County in part because of tax rebate payments from state and local governments in return for creating jobs.

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Prioria Robotics vice president of engineering and co-founder, Jason Grzywna, left, and CEO and co-founder Bryan da Frota, right, stand with Gov. Rick Scott, center, during his visit to Gainesville in this Oct. 19, 2012 file photo. Prioria Robotics has been approved for a $56,000 rebate to create an additional 40 jobs.

Erica Brough/The Gainesville Sun

Facts

About the Qualified Target Industry program

- To be eligible, businesses must be in target industries that include technical fields, financial and professional services, or manufacturing, as determined by economic development organizations, the state university system, local governments and other stakeholders.
- A business must create at least 10 new full-time jobs paying 15 percent more than the average annual wage, which is currently $34,446 in Alachua County. The rebates start at $3,000 per job, with more for higher wages or for locating in a depressed area, rural community or in a cleaned up industrial brownfield.
- The companies must create at least 80 percent of the jobs promised to qualify for rebates, which come from taxes they have paid on corporate income, sales, property, intangible personal property, insurance premiums and other taxes. The state picks up 80 percent of the rebate, while local governments pick up the other 20 percent.

A mobile application developer based in Wellesley, Mass., Mobiquity has promised to create 260 jobs paying almost $50,000 a year if it opens here. In return, it would receive rebates of as much as $2.08 million through the Qualified Target Industry program.

The Alachua County Commission approved its 10 percent share of the cost — $208,000 — at its Jan. 8 meeting, and the Gainesville City Commission is scheduled to vote on its 10 percent share today.

As business incentives go, most local elected officials have supported the QTI program, since the companies first must create a certain number of jobs to get rebates instead of receiving payouts up front as is often the case with recruiting programs in other states. They also say the added tax base and other benefits to the community more than justify the costs.

On the other side, County Commissioner Mike Byerly has consistently voted against granting the QTI tax rebates, even while expressing support for the businesses themselves, saying government should not be in the business of picking winners and losers or providing direct payments to private entities using taxpayer dollars. His opposition often mirrors the debate at the national level, where critics deride incentives as corporate welfare.

Since 1997, 14 companies have promised to create 2,000 jobs in Alachua County in return for $9 million in tax rebates.

Complete numbers on the number of jobs created and rebates paid out are hard to come by.

Alachua County officials were unable to provide the information by late Wednesday.

The state Department of Economic Opportunity would provide data on only the first three completed projects approved from 1997 to 1999. Dollar General promised 385 jobs in return for $962,500 in 1999 and ended up creating 568 jobs, getting $693,000 in return. CuraGen Corporation promised 25 jobs in return for $100,000 in 1997 and ended up creating 33 jobs for $45,000 in return. USBiomaterials did not create any jobs under the program and received no payment.

RTI Biologics, then Regeneration Technologies, was approved for $300,000 in return for 75 jobs in 2000.

Information released by the DEO and published by the Orlando Sentinel in November 2011 showed that video game maker Ignition Entertainment created 59 jobs and was paid $54,000 before shutting down, and the Enterprise Rent-A-Car call center received $98,000 in return for creating 146 jobs.

A 2012 report from Enterprise Florida showed that Bren-Tronics near Alachua created nine jobs and was paid $265.

For six of the 14 companies, the clock starts ticking this year to create jobs and receive payments. Companies have a four-year window to meet their obligations, with extensions available under certain circumstances.

Prime Conduit in High Springs was approved in 2010 but was one of 37 companies statewide granted more time to meet its job goals, starting in 2014.

The QTI is the most widely used business incentive program in the state, according to Enterprise Florida, the state's public-private economic development organization.

In its 2012 annual incentives report, the agency says incentives often are needed to tip the balance to one location over another when other critical factors are in place such as an adequate labor pool, good education system, transportation infrastructure and business-friendly climate, noting that other states often offer higher-dollar-value incentives.

A September 2012 report prepared for Enterprise Florida by McCallum Sweeney Consulting of Greenville, S.C., and Avalanche Consulting of Austin, Texas, says Florida lags behind other states in funding for manufacturing training incentives and is at a disadvantage in competing for financial services businesses, since without a personal income tax it cannot offer the withholding tax rebate available in other states.

David Ramsey, director of economic development for the Gainesville Council for Economic Outreach, said most companies come here more for a strategic advantage such as access to good talent or to Interstate 75 instead of low-cost incentive packages such as free land or a free building.

"Incentives really shouldn't sell the whole deal. It should really be icing on the cake," he said.

From 2009 to 2012, the state paid out $22.2 million for 11,041 jobs created. Using a formula from the U.S. Department of Commerce, Enterprise Florida reported that every $1 invested created $16.75 in state tax revenue over four years.

County Commissioner Lee Pinkoson said the county has to have something to offer to compete for companies that want incentives.

"In a perfect world, companies would just say, ‘It looks like this is a fine place, and we want to come there,' but that's not the way it's done," he said.

He said the QTI program benefits the community on multiple levels. For one, local governments get more in property taxes than the property otherwise would generate and indirectly from sales taxes paid by new employees.

Pinkoson also said he likes that the state pays the biggest portion.

"We get out more than we put in, definitely," he said.

According to Enterprise Florida, the QTI is supposed to play a role in persuading a business to locate or expand here.

Ten of the QTIs in Alachua County were for businesses moving here, and four were for companies that were already here to expand.

When the county approved a QTI for Bren-Tronics to locate its rechargeable battery operation near the city of Alachua in December 2009, Byerly lamented that the company might have come here anyway.

Homegrown company Prioria Robotics was approved for a $56,000 rebate to create an additional 40 jobs starting this year.

When the QTI was approved in 2011, CEO Bryan da Frota told The Sun that the company's investors wanted to look at areas with a lot of business incentives. After looking at Tampa, Georgia, North Carolina and Canada, the company decided to stay.

Pinkoson said he always wonders whether the companies would have come here or stayed here anyway, but he wouldn't want to take that chance by denying a QTI.

"Especially for the ones that are already here, you would hate to lose somebody, a company and the jobs that were there, and adversely affect the people's lives that were working for that company," he said.

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